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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






2. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






3. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






4. Occurs when LRAC is constant over a variety of plant sizes






5. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






6. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






7. The price of a good measured in units of currency






8. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






9. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






10. The change in quantity demanded resulting from a change in the price of one good relative to other goods






11. The difference between total revenue and total explicit and implicit costs






12. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






13. The mechanism for combining production resources - with existing technology - into finished goods and services






14. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






15. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






16. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






17. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






18. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






19. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






20. The additional benefit received from the consumption of the next unit of a good or service






21. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






22. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






23. A good for which higher income decreases demand






24. TR = P * Qd






25. Exists if a producer can produce more of a good than all other producers






26. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






27. Ed < 1






28. The rational decision maker chooses an action if MB = MC






29. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






30. Entry (or exit) of firms does not shift the cost curves of firms in the industry






31. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






32. Two goods are consumer substitutes if they provide essentially the same utility to consumers






33. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






34. Es = (%dQs) / (%dPrice)






35. Total product divided by labor employed. APL = TPL/L






36. MUx / Px = MUy/Py or MUx/MUy = Px/Py






37. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






38. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






39. AVC = TVC/Q






40. Ei = (%dQd good X)/(%d Income)






41. AFC = TFC/Q






42. The practice of selling essentially the same good to different groups of consumers at different prices






43. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






44. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






45. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






46. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






47. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






48. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






49. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






50. Ed = 8 - infinite change in demand to price change







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